Your new Mercedes-Benz could be a van; a conversation with Bernhardt Glaser

Your next Mercedes-Benz could be a truck.

Decades after the Ford F-150 became America's best-selling model in the U.S., foreign manufacturers are belatedly realizing that the road to big profits in the United States is offering trucks.

While Mercedes-Benz has long built and marketed a wide range of commercial trucks in the rest of the world, the brand's U.S. market position as a luxury brand has prevented Daimler from seriously marketing them in North America.

But this is changing.

In October 2013, Mercedes-Benz USA split its marketing efforts into two divisions, passenger cars, headed by Steve Cannon, and commercial vans headed by Bernhard Glaser who was promoted to vice president and managing director Mercedes-Benz Vans USA.

Glaser's career began at Mercedes-Benz parent company, Daimler AG, in 1992 in strategic product planning and later as worldwide product manager for the E-Class. In 1998, he came stateside as department manager for the SL, SLK, CL and CLK models in the U.S. market. After three years, he returned to headquarters in Stuttgart, Germany as executive assistant to the member of the board for worldwide sales and marketing of Mercedes-Benz, Maybach and Smart. Glaser rejoined Mercedes-Benz USA in 2003 as general manager, product management, and was appointed vice president, marketing in 2012.

Glaser now is responsible for the company's van division. For the time being, that includes the full-size Sprinter commercial van, and the new Metris midsize van, which goes on sale in October. In March, Mercedes-Benz Vans announced that the division planned to invest $500 million dollars to build a new van plant in Charleston, S.C., to build the next-generation Sprinter for the U.S. market.

I sat down with Glaser on Thursday to talk about the new initiative. Here's what he had to say.

Larry: Where do the impetus come from to expand Mercedes-Benz's commercial vehicle line? Mercedes-Benz has a luxury image here in the United States and some would say that commercial trucks are not ideal to market alongside of that.

Bernhardt: This goes back a couple years, when what you just mentioned was true; that's why we started our commercial business in the United States under different brands, like Dodge and Freightliner. But in 2010, we started branding Sprinters as Mercedes-Benz. Maybe there were some people who still thought what you were thinking, but we learned that wasn't the case, as these Mercedes-Benzs were embraced. But let's not forget that we're catering to a different clientele. We're not catering to an S-Class customer; we're catering to a commercial van customer.

You know, there was once similar thinking; would the C-Class ever be able to be launched in the United States? And you see where we are now; it's our highest selling, volume model. And launching the CLA under $30,000, we had similar people saying again, "oh you cannot do that to the Mercedes-Benz brand." But I think that the brand is so strong that the customers are fully embracing and accepting it.

Mercedes-Benz Sprinter

So we have no issues with that with the Sprinter and, to your question, do we think that it is the right time to expand it? We are very successful with our Sprinter, selling 26,000 units. But if you really want to expand your business, you need more products; you need a second product line, and Europe offers several sized vans and with Daimler's commitment for the brand business in the United States, it's just the right step now to expand our product portfolio and bring out the midsize vans. So we're really excited.

Larry: Now that you mention it, it's understandable when you start to think about Mercedes-Benz brand's strengths: safety and engineering. Then it starts to make sense. Those are the brand's selling points as much as where it fits in the price spectrum.

Bernhardt: And that goes with every commercial van as well. If you look at the features that we offer on our Metris, it comes standard with technology that everybody's familiar with from passenger cars. So it comes standard with Crosswind Assist, which we have standard on our Sprinter now, but which comes from the big SUV, the GL. It comes standard with something that was invented for the passenger car side, which is Attention Assist, standard on our Metris. And we have the safety technology features, optional on the Metris, which come from the passenger car side. But safety is not something that should be offered on only commercial or passenger car, that's why we feel so strongly about offering these safety features such lane tracking assist and parking assist and blind spot monitoring for our commercial customers.

Larry: The Sprinter is meant to compete with such mainstream full-size vans as the Ford Transit and Ram Promaster, what do see as the Sprinter's advantage over these vehicles? What is the Sprinter's unique brand proposition?

Bernhardt: I like to call the Sprinter the Swiss Army Knife of all brands because it's a universal tool that can just tackle any job and tackle it very well. And the obligation of my job is to keep the Swiss Army Knife's tool very sharp and maybe add a tool here and there every year. And that's what we do. So the Sprinter for me is the benchmark among the Euro-style vans. It was the first one; it was the pioneer. But we have kept it fresh and alive and we sharpen the tools, not just this year, but also every year. Two years we refreshed the entire look of the Sprinter. We added technology to it; we added a new engine, the four-cylinder diesel to it and it's very fuel-efficient. We added safety features to it, like Crosswind Assist, like blind spot monitoring, and we've kept it the benchmark. So we are going to sharpen it every year.

Larry: Going back to the Metris; obviously one of the things that makes the Metris unique in this segment isn't just the size of it, since it's competing against smaller compact vans, but you're also targeting a segment of the market where there isn't anything quite like it.

Mercedes-Benz Metris

Bernhardt: That's exactly the point. If you look at the van market in the United States, it's very simply structured. There are large vans, midsize vans and small vans. Large vans dominate the van market: 80 percent of the van market is large vans. Then you have the small vans, which you just mentioned; that's probably 40- or 50,000 units a year.

In the midsize niche, it's pretty empty right now. There's one van currently offered that's categorized as a midsize van that's going away - the Ram CV Trademaster - which is more or less a converted minivan. So this is the perfect field for us to attack and bring a new product in which, to your point, we call it the right size concept because it offers so much more cargo and payload capacity than the smaller vans. However, it still fits in any standard size garage at home, or you can bring it job sites where you can drive into parking decks.

Larry: Looking at the broad array of passenger cars that Mercedes-Benz offers in the United States, it would seem that it is getting harder to find profitable niches to fill. But on the van side of the market, at least here in the U.S., that's certainly not the case. It seems obvious to bring to America more of what's offered in the rest of the world. And expand your market share.

Bernhardt: Exactly right. You know these decisions do not take three months and then you bring out the van; there are development lead times involved with that. So a couple years ago, we targeted the midsize van segment thinking that it's time for the new Vito, which is what the Metris is called in Europe. It's replaced in Europe with a new generation; this is the right time to bring this vehicle to the United States. So that brings us to a broadening of the product portfolio, which, as you mentioned, Europe offers different van configurations. They also offer, for example, the Citan (pronouced see-ton), which is a small van. We don't think it's right for the U.S. Market, but who knows what's happening in the future?

Larry: What's unique about the Metris is that it's rear-wheel drive. But you do offer this vehicle with all-wheel drive and a manual transmission in Europe, but not initially in the United States. Obviously, these are features you could bring over to the United States fairly quickly if the market demands it.

Bernhardt: Of course. This is the advantage of having a global parts shelf, where we can look into what's available. But we also have to look at what makes sense and what the demand is in the United States. So when we configured the Metris for the United States. So when we configured the Metris for the United States, we started with building a van, which would easy for our dealers to order and stock, because 80 percent of the U.S. market is built for stock and then the customers come and pick it from the lot. They're not custom-ordered like they are in Europe, where the customer waits until their van comes in. So we needed to simplify the line-up. We picked the right length for the U.S. market, the right wheelbase for the U.S. market and we picked rear-wheel drive for the U.S. market because it offers the best set-up; the best driving characteristics and also has advantages for towing.

Larry: Have fleet buyers and those who you're targeting to buy the vehicle been resistant to the idea of the four-wheel drive 4Matic option on the Metris?

Bernhardt: Currently in Europe we offer a front-wheel drive, a rear-wheel drive and a 4Matic option. For the United States, we start with rear-wheel drive only, but if there is enough demand to create a business case for 4Matic for the United States, then that's something that we are definitely interested in.

Larry: Would it take a long time to bring over?

Bernhardt: No. It's adapted already for the platform in Europe. However, it's mated to a diesel engine there, so the engineering capacity would have to go into 4Matic for that platform. So it's something that would probably take a year or so to develop.

Larry: Now, you've announced that you're building a plant in Charleston, S.C. Talk about that a little bit.

Bernhardt: Being in the U.S. aarket, we are really excited to have Daimler's commitment to further expand and show commitment for the van business in the United States, but also shows that we believe the van market in the U.S. Is a growing market, and that we are serious about the van business in the United States, and that we are here to stay. We are investing $500 million in South Carolina outside Charleston to build an all-new facility from the ground up to produce the next generation Sprinter here in the United States. And that involves a body-in-white shop, and a whole paint shop. So Sprinters will not just be born to run, they will also be born in the U.S.A.

Larry: That should make ordering a lot easier.

Bernhardt: It will cut down the ordering lewd time dramatically because, as you said, it will built here in the United States. And it will be faster to our dealers and there's one more advantage. We avoid the import tax, which is known as the chicken tax. This is something that is a logistical challenge for everybody who wants to bring a commercial van to the United States from Europe; it's a 25 percent import tax. Obviously if you produce in the United States, you don't have that.

Larry: Will you be building Sprinters for other markets from the South Carolina plant?

Bernhardt: No, it's just U.S. production at this point; it's for the United States.

Larry: What's the plant's capacity?

Bernhardt: You know, we haven't published that number, but today were selling 26,000 Sprinters a year. So if you look at the cure optimistically, it's going to be a minimum of 26,000 Sprinters.

Larry: Spoken like a true auto executive.

Bernhardt: I am well trained. (Laughs)

Larry: Coming into this from the car side of the business, is there anything that surprised you about the van side of the company?

Bernhardt: As you know, I have worked in the U.S. for a long time already, but I have always spent my time on the passenger car side. To answer your question, what I learned most on the commercial side, is the customer is totally different. We have a high share of fleet customers, which you don't have on the passenger car side. So it's a very important part of our business. Almost 50 percent of our business is fleet business. So we work closely with fleet companies to create that business.

So, for example, for the Metris, to make sure they have early access and exposure to the car. We have already invited them a year before launch to our factory, where we gave them early access to the Metris; to look at it and crawl through it and measure it and see if it's good for their businesses. And we did that not just for fleet customers, but also on the passenger van for limousine services and hotel shuttles. On the commercial van, we gave access to upfitters so that they are ready at market launch to have shelving systems, custom made, tailor made upfitters, refrigerating systems, stuff like that. So that's an important side of the business that we don't have for the cars.

Larry: I imagine dealer reaction must be strong.

Bernhardt: Dealers can't wait to get it. They love the commercial franchise to begin with, a strong subset of our passenger car dealers have in addition commercial franchises. We have a lot of hand-raisers who still want it.

Larry: What's holding you back?

Bernhardt: We have to be careful with who we award our franchise to. There are certain criteria that they have to fulfill. The commercial franchise comes with certain requirements. Some of them are brick and mortar; the facility has to be able to repair: service door lifts, lifts, heights have to be right. But also, on the human side, we require a service advisor dedicated to the van business, also we require a sales person dedicated to the van business, and some technicians to repair vans only. So requirements come with it. But for the dealers, it's just an additional business and they like it. It's very profitable.